Key Takeaways

  • Dissolving an LLC in Maryland requires both formal approval from members and filings with the Maryland SDAT.
  • The process includes settling debts, filing outstanding personal property returns, and submitting Articles of Cancellation.
  • Maryland requires careful recordkeeping—minutes or written consent must document member approval of dissolution.
  • Creditors, employees, and tax authorities should be notified before winding up to avoid legal or financial liabilities.
  • Expedited processing is available if filing Articles of Cancellation in person or by fax with proper payment details.
  • An LLC may revoke dissolution before final cancellation if members decide to continue business operations.

To close a business in Maryland requires knowledge of the correct processes and procedures, such as tasks that are referred to as dissolving and winding up of a business. Individuals who wish to stop conducting business through their LLCs should officially dissolve it. If this is not done in good time, it may result in legal issues, penalties, and tax liabilities.

The Dissolution Process

To officially de-register an LLC that was registered in the state of Maryland, and thus put it out of the reach of creditors, a process called dissolution is required. This process involves informing the MD Department of Assessments and Taxation (SDAT) that you want to close your business. Once the Maryland Secretary of State verifies that all obligations to the state have been fulfilled, it gives the SDAT the go-ahead to approve the closure of your business.

Winding Up Business Affairs

Before filing final paperwork, Maryland law requires LLCs to “wind up” their affairs. This step ensures the business closes responsibly and minimizes future disputes. Winding up typically includes:

  • Settling Debts and Obligations: Pay off creditors and resolve outstanding contracts.
  • Notifying Stakeholders: Inform employees, vendors, and customers of the closure timeline.
  • Disposing of Assets: Sell or distribute company property according to the operating agreement.
  • Handling Licenses and Permits: Cancel business licenses, permits, and registrations to prevent recurring fees.

These steps help protect members from lingering liabilities and demonstrate to the state that the LLC is ready for cancellation.

Requirements for Dissolution

Corporations in Maryland must file personal property reports with the proper authorities before approval of dissolution can be given. If your business has been forfeited, you must file for reinstatement and submit the personal property reports before your company can be dissolved by Maryland's SDAT.

Once a corporation is registered with the MD SDAT, the corporation becomes responsible for any and all recurring obligations with the department. If the corporation does not pay its taxes or file the proper taxes, it becomes liable for additional fees and penalties.

If you want to dissolve your corporation, a thorough look at its formation documents (i.e., the operating agreement and the articles of organization) should reveal the steps and rules required to do so. In most cases, the rules of operation will require a vote by the members of the LLC on a motion of dissolution. The operating document should also indicate the percentage of votes required for a successful motion. To avoid legal issues or unnecessary delays, it's best to follow all the steps and procedures for dissolution outlined in the document. This could entail giving advance notice to all members before the meeting.

If required, Maryland's LLC Act also offers an alternative method for dissolution of corporations that are registered in the state. It simply requires that the business owner obtains unanimous consent for dissolution from all members of the LLC. For corporations with a board of directors, the board must adopt the motion for dissolution before it can be instigated.

Filing Articles of Cancellation

Once members approve dissolution and obligations are settled, you must file Articles of Cancellation with the Maryland State Department of Assessments and Taxation (SDAT). This document formally ends the LLC’s legal existence. The Articles of Cancellation must include:

  • The official LLC name.
  • The date Articles of Organization were filed (and amendments, if any).
  • The effective date of dissolution.
  • A statement that all debts and obligations have been paid or provided for.

You may file in person, by fax, or by mail. Filing in person or by fax allows for expedited processing if you include credit or debit card details. When mailing, enclose a check covering the required fee.

Recording the Resolution of Dissolution

Whether the LLC is dissolved by unanimous consent of its members or through the rules stated in its operating agreement or articles of organization, the approval of the dissolution must be recorded either on a written consent form or the official minutes of the meeting where the resolution was adopted.

If a Maryland corporation has issued shares of stock to stakeholders, then a shareholder meeting must be held and the motion for dissolution presented. Regulations require that a majority of shareholders must approve the dissolution plan before it can be carried out, and this must be indicated in the minutes of the shareholders' meeting.

If no shares were issued by the corporation, then the process becomes much easier. Businesses are required to file an article of cancellation with Maryland SDAT in person, by fax, or by mail.

The LLC Act requires that an article of cancellation contains the following information

  • The name of the LLC.
  • The dates when the company's article of organization was filed (as well as the dates for any amendments).
  • The date of dissolution.
  • Other information which members may decide to include.

If all the documents necessary for filing an article of cancellation are sent by fax to the SDAT, the process is automatically expedited. However, you need to include your credit or debit card information along with your request. If the documents are sent by mail, ensure that you include a check that covers all fees. When you present the files in person, you can pay the fee for expedited processing either with cash, money order, or check.

The LLC Act allows individuals to revoke the dissolution of their LLC's if they want to continue transacting business after filing the article of dissolution. However, this is only possible if they are yet to file the certificate of cancellation.

Revoking Dissolution

In some cases, members may change their minds about closing the business. Maryland law allows revocation of dissolution if Articles of Cancellation have not yet been filed. Revocation requires:

  • Member approval under the LLC’s operating agreement.
  • Filing a certificate of revocation with the SDAT.

This option helps businesses resume operations without starting from scratch.

Notifying Creditors and Employees

To limit liability, LLCs should provide written notice to creditors and employees about the business closure. Maryland law allows LLCs to set a deadline for creditors to submit claims. Notices should include:

  • The mailing address for claims.
  • A clear deadline for submission.
  • A warning that late claims may be barred.

Employees should also receive notice regarding final paychecks, benefits, or COBRA coverage where applicable.

Tax and Reporting Obligations

Maryland LLCs must address state tax obligations before dissolution is accepted. This includes:

  • Filing Final Tax Returns: Submit final federal and Maryland tax returns and pay outstanding balances.
  • Personal Property Return Compliance: Ensure all personal property returns are current, even if the LLC held no assets.
  • Revived or Forfeited Entities: If an LLC is forfeited due to noncompliance, it must be reinstated before filing Articles of Cancellation.

Failure to meet these obligations can delay or prevent dissolution approval.

Frequently Asked Questions

  1. How long does it take to dissolve an LLC in Maryland?
    Standard filings can take several weeks. Expedited processing is available if filed in person or by fax with additional fees.
  2. Do I need tax clearance to dissolve an LLC in Maryland?
    Yes. All final state and federal tax obligations, including personal property returns, must be satisfied before the SDAT approves dissolution.
  3. What happens if my LLC is forfeited in Maryland?
    You must reinstate the LLC by filing past-due reports and paying fees before you can officially dissolve it.
  4. Can I dissolve an LLC without member approval?
    No. Dissolution requires either unanimous consent or approval under the operating agreement’s voting rules.
  5. Can dissolution be reversed after filing?
    Yes, but only if Articles of Cancellation have not yet been filed. After cancellation, a new LLC must be formed.

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